Fund management industry reaches record

A new record has been set, but not all participants benefited equally.

a woman

Recent research released by Morningstar has found that assets under management within the Australian funds management industry reached a record high in the June quarter of $992 billion. The record was helped along by positive market movements and investor inflows of $12.6 billion over the quarter.

One interesting point noted in the research was just how wary investors remain of domestic equities, with Morningstar fund research analyst Darren Cunneen noting that “Australian and international equities were as different as day and night. The former lost over $12.5 billion while the latter gained around $17.8 billion.”

Investor bias for international over domestic equities was starkly observed by the growth in funds under management (FUM) at one of Australia’s fastest growing listed international fund managers. Over the 12 months to June 2013 Magellan Financial Group (ASX: MFG) saw FUM grow from $4 billion to $14.7 billion. This increase was helped along by a 39.7% return in its flagship fund, as well as $1.8 billion in retail fund net inflows and $6.2 billion in institutional fund net inflows.

In comparison Perpetual (ASX: PPT), which is primarily a domestic-focused equity manager, saw $700 million in net fund outflows from its Australian equities channel. Despite the outflow from equities and also from cash and fixed interest however, thanks to improving equity markets and solid returns, overall FUM within the Perpetual Investments division increased from $22.6 billion to $25.3 billion over the year, a rise of 12%.

Foolish takeaway

With an ever increasing pool of superannuation and what many perceive as a significant overexposure by superannuation (as a whole) to domestic equities, it is highly likely that allocations to global equities will increase in the future. Investors who are considering investing in the asset management industry may want to take a closer look at established global fund managers such as Magellan and Platinum Asset Management (ASX: PTM) to get exposure to this potential growth.

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Motley Fool contributor Tim McArthur owns shares in Perpetual.

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